Bitcoin dropped over 6% on Thursday to around $84,000, dragging down other major cryptocurrencies amid fears over heavy AI spending by tech giants. The sell-off coincided with declines in tech stocks following Microsoft's earnings report, while the Federal Reserve held interest rates steady. Liquidations of leveraged positions exceeded $650 million, mostly from bullish bets.
The cryptocurrency market experienced a sharp downturn on Thursday, with Bitcoin falling to a low of $83,757 before recovering slightly to $83,788, according to CoinGecko data. This represented a 6% decline over the past 24 hours and a similar drop over the week, leaving it down year-to-date. Ethereum traded at nearly $2,792, down more than 7%, while tokens like XRP and Solana saw comparable daily losses of 5% to 7%.
The plunge mirrored a broader risk-off sentiment in financial markets, triggered by investor concerns about escalating AI expenditures. Microsoft's recent earnings revealed record spending on AI initiatives, raising worries that returns may take too long to materialize. "Regardless of the fact that many in the Bitcoin space see Bitcoin as the world’s hardest money and stack Bitcoin regardless of price, the vast majority of the market still sees Bitcoin as a tech trade," said Timot Lamarre, director of market research at Unchained.
Crypto's correlation with U.S. equities, especially tech stocks, has been evident, as Bitcoin often moves in tandem with these assets. The Federal Reserve's decision on Wednesday to keep interest rates unchanged at 3.5%-3.75% had little immediate impact, with markets focusing instead on upcoming earnings from Apple, Meta Platforms, and Tesla, which could potentially lift risk assets if strong.
The sell-off led to significant liquidations, with over $650 million in bullish futures positions wiped out across cryptocurrencies, including $313.7 million tied to Bitcoin longs. Total futures liquidations reached $822.4 million in the past 24 hours, predominantly longs at $696.8 million. Spot trading volumes halved to $900 billion in January from $1.7 trillion the previous year, reflecting cautious sentiment amid geopolitical tensions.
Crypto-linked stocks also suffered, with Coinbase down 7% to $195—its lowest since May—and on an eight-session losing streak. Competitors like Gemini fell 8%, Bullish 16%, and Circle 20% year-to-date. However, Bitcoin miners pivoting to AI infrastructure, such as Hut 8, IREN, CleanSpark, and Cipher Mining, posted year-to-date gains despite the daily dip.
Analysts noted negative perpetual funding rates across major tokens, signaling bearish bias, though historical patterns suggest potential short-term bottoms. Bitcoin's price hovers near the $84,099 aggregate cost basis for U.S. spot ETFs, with key support at $80,000. A break below could target April 2025 lows around $76,000. "Everything from weak earnings results to worries around Iran and government shutdown are causing a broad-based selloff," said Joshua Lim, global co-head of markets at FalconX.
